Climate change and poverty

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Climate change and poverty

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Climate change and climate policies will affect poverty reduction efforts through direct and immediate impacts on the poor and by affecting factors that condition poverty reduction, such as economic growth. This presentation will summarize a research program conducted at the World Bank with many external partners to explore this relation between climate change and policies and poverty outcomes by examining three questions: the (static) impact on poor people’s livelihood and well-being; the impact on the risk for the non-poor individuals to fall into poverty; and the impact on the ability of poor people to escape poverty. The presentation proposes four channels that determine household consumption and through which households may escape or fall into poverty (prices, assets, productivity, and opportunities). It then discusses whether and how these channels are affected by climate change and climate policies, focusing on the exposure, vulnerability, and ability to adapt of the poor (and those vulnerable to poverty). It reviews the existing literature and offers three major conclusions. First, climate change is likely to represent a major obstacle to a sustainable eradication of poverty. Second, climate policies can benefit the poor provided that (i) poverty concerns are carefully taken into account in their design and (ii) they are accompanied by the appropriate set of social policies. Third, climate change does not modify how poverty policies should be designed, but it creates greater needs and more urgency. The scale issue is explained by the fact that climate will cause more frequent and more severe shocks; the urgency, by the need to exploit the window of opportunity given to us before climate impacts substantially increase.

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Planetary Boundaries: Abundance within a Global Carbon Budget

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Planetary Boundaries: Abundance within a Global Carbon Budget

Extraordinary climate stability since the end of the Holocene 11 000 years ago, has provided the necessary conditions for human development. Human activity is now pushing the Earth system towards the limits of its ability to support further unsustainable development, in many cases posing the greatest threat to the survival of the poorest and most vulnerable societies. These planetary boundaries describe the human influence on and limits to Earth's life-support systems. Within the current paradigm of development, we have already crossed planetary boundaries associated with carbon dioxide levels driving climate change, the loss of biodiversity, the addition of phosphorus, nitrogen and other nutrients to ecosystems, and deforestation. The latest research shows that in some cases these changes may be irreversible, having crossed a tipping point.

A new framework of sustainable development is required to ensure that humanity remains within the 'safe operating space' of the planet defined by the planetary boundaries, whilst allowing all societies to become more prosperous on a resilient planet. 2015 offers a unique opportunity to address key aspects of this existential challenge. Negotiations on the new Global Climate Agreement in December and discussions on the UN Sustainable Development Goals in September, are important fora for charting a holistic path to an equitable and safe future for all societies. The risk of crossing additional planetary boundaries will rise with delayed action on both these fronts, driving the Earth system further away from the stable conditions that have supported human development until now. In particular, a global climate change agreement that limits warming to well below 2 degrees and respects key equity principles is necessary to enable achievement of development objectives.

This contribution draws on recent new research on Planetary Boundaries and on the Earth Statement project led by the Earth League.

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This talk will emphasize challenges and possibilities for climate change mitigation in the context of sustainable development imperatives. Mitigating global climate change will require large scale reductions of GHG emissions not only in industrialized, but also in developing countries. However, historically, economic and social development has been highly correlated with fossil fuel use. In the recent past, economic growth in China, which has lifted hundreds of millions people out of poverty, has gone hand in hand with a dramatic carbonization of the Chinese energy system. As other newly industrializing countries are currently following the same track there is a risk of creating a lock-in of carbon-intensive energy infrastructures which will render ambitious climate stabilization targets difficult to achieve.

Even though the recent surge in coal has been accompanied by a market-driven proliferation of renewables in emerging economies such as India and China, the question arises how, and to what extent, the pursuit of economic growth and poverty alleviation can avoid the repetition of historical carbon-intensive development patterns.

While mitigation costs are expected to be moderate on the global scale, they still can – depending on the burden sharing scheme in place – pose serious challenges for financially and institutionally constrained developing countries. For these countries, other considerations, such as poverty alleviation, are likely to constitute more pressing short-term policy objectives. Even with financial support from the global community, there are serious concerns regarding the potential negative effects of financial inflows e.g. on the development of advanced industries.

Various approaches have been proposed to support developing countries in formulating national climate polices, including financial assistance of USD 100 bn per year from the Green Climate Fund. Such transfers can only be effective if they are designed in a way that minimizes potential adverse effects by means of transparency mechanisms, monitoring and conditionality. They also need to guarantee ownership by recipients by embodying a broad perspective on climate change that takes into account particular countries’ specific development objectives. In this regard, recent research has highlighted that policies that do not only aim at reducing emissions, but also leverage substantial co-benefits are most likely to be politically feasible. Prominent examples of such ‘win-win policies’ include clean-air policies, reforming fossil fuel subsidies, and improving public transport systems, as well as improved agricultural practices and inclusion of climate change considerations in regional trade agreements.

As a consequence, these policies have the potential to overcome the “dangerous climate change vs. dangerous mitigation” dilemma. By defining appropriate guardrails for natural as well as social objectives, they incorporate a multi-dimensional perspective of sustainable development. Such sustainable development objectives could further advance bottom-up incentives for individual countries to embark on climate-friendly development pathway which provide an important entry point for more ambitious climate policies – including an internationally binding agreement – in the future.

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Energy consumption is necessary for the delivery of human development by supporting access to basic needs, services and infrastructures. Given prevailing technologies and the high degree of inertia in practical rates of decarbonisation, raising global living standards may entail growth in energy consumption and consequent greenhouse gas emissions (GHG) impact on the climate system. Yet despite considerable elaboration in the literature on equity proposals and the 'fair burden-sharing' of emissions rights between industrial and developing nations, there is very little research on the actual energy use necessary for development and likely arising emissions. This is a prescient issue in the context of on-going international negotiations, where it is now recognized that the participation of all major emitters, including key developing countries, is required to break the climate impasse. Our question thus focuses on extrapolating existing trends in energy growth, emissions and human development progress; highlighting the level of policy ambition that will be necessary to meet the twin challenges of climate change and poverty alleviation.

We build on recent work analysing the interaction between human development, energy use and GHG emissions [1–3] and base our presentation on a forthcoming publication in Global Environmental Change [4]. Yearly cross-section regressions on 3 pairs of country development and environmental impact indicators are performed for the period 1990-2010: life expectancy, access to basic needs and GDP per capita as dependent variables; per capita final energy consumption as an independent variable. Access to basic needs is a composite indicator comprising six dimensions of the bare minimum requirements for development (access to sanitation, electricity, water, food supply, education and a survival rate). Following Steinberger et al. [1] and Costa et al. [2], we estimate hyperbolic saturation curves from this historical data, on the basis of which we project future energy for ‘development as usual’ (DAU) to threshold levels of each human development indicator. This scenario incorporates the observed autonomous improvement in the efficiency of delivering human development, but assumes no near-term climate policy. In the final stage of our analysis, the DAU scenarios are translated into GHG emissions using intensities from an integrated assessment model (IAM) and the resulting pathways are compared to a cost-based allocation of emissions rights. This allows us to contrast likely development emissions with a mitigation scenario in which only economic efficiency is prioritised.

We find an unbroken, near-continuous trend in human development improvement over the past two decades. As in previous studies we find a high rate of decoupling between human development and energy consumption, but with regionally distinct patterns leading to diverging estimates of the total GHG emissions required for meeting development needs. Nonetheless, in the absence of policy, human development in these regions is likely to generate approximately 1000Gt CO2eq by 2050, a quantity unlikely to be compatible with internationally agreed goals to limit climate change to 2oC. The results are sensitive to the rate of decoupling and level of ambition in human development progress, with existing examples of more efficient pathways offering hope that such emissions may be avoidable. Compared with the IAM scenario, a cost-based allocation of emissions rights also appears difficult to reconcile with poverty alleviation; while high levels of basic needs and life expectancy can be satisfied at lower levels of emissions than continued economic growth.

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This paper quantifies the potential impacts of climate change on poverty in 2030 and 2050, in 92 countries covering 90% of the developing world population. It accounts for the deep uncertainties that characterize future socio-economic evolutions. It also considers many impacts of climate change, based on original work commissioned by the World Bank.

To build scenarios, we use a micro-simulation model based on household surveys and explore a wide range of uncertainties on future structural change, productivity growth or demographic changes. This results, for each country, in the creation of several hundred scenarios for future income growth and income distribution. We then explore the resulting space of possible futures, using several indicators of poverty and income distribution and use scenario discovery techniques to identify the main drivers of inequalities and poverty reduction. Inequality and poverty depend on drivers that differ across countries. We find that in many countries, redistribution and structural change are powerful drivers of poverty and inequality reduction, except in low-income countries. In the poorest countries in Africa, for instance, reducing poverty cannot rely on redistribution but requires low population growth and sustained productivity growth in agriculture.

Once we have explored the space of possible outcomes for poverty and inequalities in each country, we choose two representative scenarios of the best and worst cases and model the impacts of climate change in each of these two scenarios. Climate change impacts are modeled through 4 channels. First, climate change has an impact on labor productivity growth for people who work outside because of higher temperatures. Second, climate change has an impact on human capital because of more severe stunting in some places. Third, climate change has an impact on physical capital via more frequent natural disasters. Fourth, climate change has an impact on consumption because of changes in food prices. Globally, we find that climate change increases poverty in the two scenarios. Impacts are very heterogeneous across countries and are mostly concentrated in African and South-East Asian countries. For high radiative forcing (RCP8.5), the impact of climate change on poverty is 6 times larger in the pessimistic scenario than in the optimistic scenario, illustrating how development and poverty reduction are powerful adaptation tools. Our results stress the urgency of achieving poverty eradication by 2030 in order to limit the negative impacts of climate change on the poor.

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This work aims to contribute to the debate on climate change policies and their link to development. We adopted a climate resilient perspective to understand how climate change policies objective can be reconciled with development goals and to explore win-win opportunities given by the integration of the climate change and poverty reduction policies.

First, we review the main theoretical concepts that characterise the scientific literature on climate risk and vulnerability assessments, and identify climate resilient indicators accordingly.

This made it possible to build the theoretical foundations for a newly design index, design to improve our understanding of the implications of aid financing on reversing unsustainable paths, reducing vulnerability to climate change related hazards and get more equitable outcomes.

The novelty of our contribution lies on the emphasis given to economic aspects related to climate risk assessment, most notably: the concepts of loss and damage, the understanding of factors enhancing economic resilience, the links between climate change policies and development (besides economic growth) and the acknowledgment of the role of natural capital in pursuing development policies.

By reviewing grey and peer-reviewed literature, we identified 133 suitable indicators, which have been grouped along six components. These have been selected from a preliminary list of 300 indicators, on the basis of general criteria like validity, data availability and their value in terms of information potential. Other specific criteria have been considered, to ensure that the indicators shortlisted are theoretically robust.

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Due to the increased impacts of climate-related extreme events, a rapidly growing literature has documented the relation between macroeconomic outputs, climate variability and human induced climate change. Methodologies either rely on modelling or on statistical approaches showing that climate variability and future human induced climate change could have effects on gross domestic product (GDP). However, current statistical approaches mostly rely on linear econometric regressions with limited specifications of climate variables, while models have a limited evidence basis.

Using a statistical approach for its evidence basis, we investigate the relationships between macroeconomic variables (investment, trade balance, sectoral value added and GDP) and climate variables in Africa from the 1960s to the present. The approach is based on a nonlinear econometric model using a piecewise regression function adapted from Schlenker and Robert (2009). Time-lagged effects are also investigated. A large set of specifications of climate variability is assessed as regressors including among others: weighted anomaly standardized precipitation, and Palmer drought severity index. For each “piece” of climate variability in Western Africa we infer climate analogy coefficients estimating the relation between climate variability and a climate-induced fluctuation of macroeconomic output.

Applying the inferred coefficients to projections from global and regional climate models, we estimate their effects on GDP and adjust African Development Bank’s forecasts for Western Africa.

This research project is supported by the United Nations Environment Programme (Regional Office for Africa), the African Development Bank and the United Nations Economic Commission for Africa.